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Execution-only firms say fees will go higher

Execution-only platforms say the FSA’s platform consultation paper will fail to reduce fund fees and might even lead to prices rising.

Cutting fees is a core aim of the RDR, with the FSA stating it would be “surprised” and “disappointed” if fees are not reduced as a result of the measures.

The FSA paper said: “We expect that annual management charges would be reduced to reflect the fact that the client will now be paying the adviser separately and any discounts negotiated would be starting from the reduced AMCs.”

But Association for Independent Discount and Non-Advisory Brokers chairman Darius McDermott, who is managing director of discount broker Chelsea Financial Services, says fees will continue to move up.

He says: “The RDR is going to create a move towards choice in investment vehicles. Premium active fund management is not going to get any cheaper, it is going to get more expensive. Platform charges might go up as well.”

Hargreaves Lansdown, which is a “non-advised” discount broker, said: “We understand the logic of the FSA’s expectation of a fall while noting market forces are the key driver of prices rather than regulatory change. However, we wait with interest to see if such changes will occur to the extent the FSA envisage.

“For example, if the IFA population shrinks, fund managers may need to retain income to finance alternative distribution and advertising strategies. Therefore, they may consider reducing charges, especially in the short term, imprudent.”

The AIDB says it welcomes the decision to allow non-advised sales “to continue in their present format”.

McDermott says: “This is recognition of the important and valuable role non-advised services have to play and means that such services will be able to move forward with a stable and sustainable remuneration structure that does not discourage competition.”


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